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September 1991

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!.. • State of New Jersey • Commission of,/nvestigation

• VIDEO GAMBLING

139882 U.S. Department of Justice National Institute of Justice This document has been reproduced exactly as received from the pers?n or organization originating it. Points of view or opinions stated In this document are those of the authors and do not necessarily • represent the official position or policies of the National Institute of Justice.

Permission to reproduce this copyrighted material in mi­ crofiche only has been granted by New Jersey state C~ission of Investi0ation ------September 1991 • to the National Criminal Justice Reference Service (NCJRS). ~urther reproduc.tion outside of the NCJRS system requires permis' slon of the copYright owner. •

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• STATE OF NEW JERSEY COMMISSION OF INVESTIGATION J ... MES R. ZAZV.L.I J ... MES J. MORL.EY CHAIRMAN 28 WEST STATE STREET EXECUTIVE DIRECTOR .... RRy H. EVEN CHICK CN 045 ROBERT ,J. CL. ... RK KENNETH D. MERIN TRENTON. NJ 08625·0045 DEPUTy!VriECTOR WIL.L.I ... M T. C ... HIL.L.. JR. (&09) 292·6767 HEL.EN K. ta ... ROINER COMMISSIONERS ASSISTANT DIRECTOR TELECOPIER • THOM ... S W. C ... NNON (609) 633·7366 EXECUTIVE ASSISTANT COUNSEL CHARL.OTTE K. G ...... L. C ... ROL. L.. HOEKJE September 1991 ILEAN... N. S ... R05 • J ... MES F. VILLERE'. JR.

Governor James J. Florio The President and Members of the Senate • The Speaker and Members of the General Assembly The State Commission of Investigation, pursuant to N.J.S.A. 52:9M, herewith submits a report on its investigation into problems related to video gambling.

Respectfully, • 'I'~-- • Barry H. Evenchick

• /7@~ ~eth D. Herin • Commissioner William T. Cahill, Jr. did not participate in discussions regarding the preparation of this report. • New Jerse Is An Equal Opportunity Employer ---- • • TABLE OF CONTENTS

IN'TRODUCTION ...... 1

• I THELAW.o ...... 6

n THE MACHrnES ...... 9 • TIl THE MOB ...... ,...... 12 Why A Priority? ...... 12 How Organized Crime Moves In ...... 15 Fay Has to Pay - Dearly ...... , .. 15 Unfair Advantage...... 17 • How Big An Industry? ...... 18 It's Hard to Leave ...... 20 Organized Crime Needs Outside Help ...... 21 Once You're Hooked ...... 21 An Additional Wrinkle ...... 23 • . The Breaking Point...... 24 Another Vantage Point...... 24 Coexistence Between Legitimate Businesses and Organized Crime ...... 25 Can the Business be Purged of Organized Crime Influence? 25 • Payoffs ...... 26 Kinds of Locations ...... 28 Why People Play ...... 29 Organized Crime Families Vie For Control of a Lucrative Industry...... 31 • More .Prosecutions ...... 32

IV THE VICTIMS ...... "...... ".. 33

• V SOLUTIONS? ...... "...... "...... 36

Increased Law Enforcement...... 36

Banning Video Games ...... C! ••••••• " •••••• 36 Government Inspection and Regulation ...... 37 • Legalization of Video Gambling ...... 37 Video Lottery ...... '...... " 37 • • INTRODUCTION

• On January 23 and 24, 1991, the State Commis­ The citizens and the lawmakers of New Jersey sion of Investigation held public hearings into prob­ are familiar with gambling. Our state has more lems relating to the illegal use of video gambling forms oflegalized gambling than any other state machines. It was a hearing that had been suggested in the nation. Over the years, a great deal of by officials in the Division of Criminal Justice in the attention has been focused on the subject. • Attorney General's Department of Law and Public Safety. Now there is something new on the horizon, gambling of a different kind. Along with fax The problems with these machines were best machines, automatic teller machines, VCR's • summarized in a few lines of testimony from Assis­ and personal computers, technology has brought tant Attorney General Robert J. Carroll, the flISt US a new and more convenient way to gamble­ witness at the hearing. video machines. Devices formerly thought to house only innocent PAC-Men and Super Mario Today ... we find the descendents of the one­ Brothers now can be made to serve a much more armed bandit proliferating not only in this state but sinister purpose. • in the entire nation. These electronic machines, like their mechanica! predecessors, are capable ofgen­ As diffiCUlt as it may be to believe, our testimony erating millions of dollars of illegal profits for or­ will show that fortunes can be won and lost in ganized criminal groups and enterprises. increments of25 cents. The evidence will dem­ onstrate that these machines also harm the young • people in our state-at a time in their lives when they ought to be spending more time in libraries [Organized crimefamiliesj have rediscovered than in video arcades. the lucrative slot machine market .... Unlike the ear­ lier mechanical devices, however, the new ... elec­ The Commission believes that there are several • tronic slot machines are equipped with sophisti­ difficult and vexing public policy issues that state cated computer software. This software allows the officials must soon confront. Those issues include: operators, manufacturers and distributors of the machines to inhibit law enforcement detection by • Whether to legalize the machines as part of the masking their true nature as illegal gambling de­ state lottery in order to claim as revenue some of the • vices. money they already generate, both because of the need to find new sources of state revenue and in the Carroll's testimony was based on his experience belief that such legalization will hun organized supervising several investigations from the mid, crime . 1980's to the present. • • Whether to legalize the machines, allow them In his opening statement at the public hearing, to remain in the private sector and regulate them Chainnan James R. Zazzali said: because of the difficulties inherent in policing the • 1

• • devices. can be conceived;

• Whether, by such legalization, New Jersey • In an era increasingly vexed by problems of would become too dependent on gambling as a crime and corruption, legalization of gambling is revenue producer and, at the same time, cause the suggested as a means, 1) to undercut organized • state's public image to deteriorate as it becomes the crime by depriving it of revenues it now derives ·virtual gambling capital of the nation. from illegal gambling, 2) to free law-enforcement resources for use against both "organized crime" • Whether more legalized gambling will create and the violent "street crime" which alarm the more gamblers while also skewing our system of citizenry and undermine social order, and 3) to values for ourselves and our children. eliminate opportunities and temptations for the • corruption of public officials whose protection or !Ie !Ie !Ie connivance is necessary to the survival of most illegal gambling operations; • Public controversy over gambling has been with • In an era when assertion of personal liberties us a long time. In fact, some authorities have so against state control is being more vociferously despaired of effectively enforcing laws controlling expressed, the legalization of gambling would remove gambling that they can contemplate only legaliza­ restrictions on personal action which many people tion as a solution. However, one probable conse­ resent as puritanical, hypocritical, repressive and quence of further legalization is an increase in the archaic. • number of people who gamble. The law enforce­ ment problems will likely remain and perhaps in­ !Ie * !Ie crease if greater numbers of gamblers result in more offenses from gambling-related problems. After six public hearings, the Gambling Study • Popular attitudes about gambling have changed. Commission made nine findings: Gambling used to be considered wasteful and irre­ sponsible as money wagered was often diverted 1. Gambling, legal or illegal, has been wide­ from productive uses and support of families. Now, spread at all times ~n living memory and historical however, gambling is a welcome generator OfPllb­ record, and will probably continue regardless of • lic revenue in some quarters as policymakers view it legal status; as a cash cow for the state. 2. Public sentiment in this state is generally There have been many comprehensive studies favorable to extension of legalized gambling; conducted in New Jersey on gambling. The Gam­ • bling Study Commission, fonned to study "the 3. Scandal and abuses of gambling have consis­ desirability and feasibility of extending legalized tently resulted not from legalization but from inade­ gambling in the State," in its report dated February quate controls over gambling; S, 1973, gave these reasons for the interest in legal­ ized gambling: 4. The success of legalization, in those areas • where it has been applied, has been related both to • In an era of fiscal stringency, legalized gam­ the strictness of regulation and to the flexibility of bling holds forth a promise of providing substantial the regulatory mechanism; revenues through as nearly "painless" a method as •

2 • • 5. Possible revenue from legalized gambling is laws have proven counterproductive in that they substantial but has often been exaggerated, and is have led to extra-legal but accepted forms of not the most significant justification for legaliza­ toleration, have habituated both citizens and • tion; public officials to such extra-legal arrangements, and have prepared the way for extensive corrup­ 6. Among officials involved in law enforce­ tion. ment, there is a general agreement that a dispropor­ tionate amount of time, manpower and other re­ • sources is devoted to enforcement of anti-gambling laws, both in relation to the actual benefits achieved Regulation within a framework of law is neces­ and in relation to the amount of such resources sary. A prerequisite to such regulation is legali­ diverted from more urgent needs of pu blic order and zation of the activity to be regulated. State safety; policy should recognize not only the futility of total suppression, but also the ... social ills and • 7. As noted, there is general agreement that corrupting influence which arise from attempt­ ,organized crime derives considerable revenue from ing to maintain a set of suppressive laws which illegal gambling activities, and law enforcement generate hypocrisy in their enforcers and resent­ officials agree that revenue from this source is used ment among the general citizenry. • to finance many other criminal endeavors, includ­ • ing the takeover of legitimate businesses and the A report issued 15 years later, the Report ang corruption of public officials; Recommendations of the Governor's Advisory Com­ mission on Gambling Oune 30, 1988), said of the 8. In some forms, the establishment of a legal dangers inherent in gambling: • gambling industry can be expected to have locally beneficial economic impact, but the economic bene­ States that have legalized, and likewise pro­ fits to the State generally are more problematic; mote, gambling have a serious obligation to di­ rect some of the funds realized from gambJing 9. Compulsive gambling is an affliction compa­ into public education/prevention, training, treat­ rable to alcoholism, affects a significant proponion ment and research programs. The wisdom of • of the population and poses a problem for public providing funds for the "victims of public pol­ policy which will continue to exist regardless of icy" is obvious. There is evidence which indi­ whether gambling is legalized. cates that the availability oflegalized gambling increases the risk of becoming a compulsive The Gambling Study Commission stated that gambler. The Commission on the Review of the • "Gambling is a pervasive and perhaps innate fonn National Policy Toward Gambling (1973 through of human activity ... .In our culture, at any rate, it 1976) recognized a direct relationship between seems to be too popular to be repressed [but too] the rate of addiction and increased availability. dangerous to be let run uncontrolled." It seems apparent, then, that by sanctioning legalized gambling as a revenue-raising device, • The Study Commission ultimately concluded: the State has contributed significantly to what is now known to be a major societal problem. Historically, the social ills connected with While the State and those who pursue profits gambling appear to have been kept within toler­ through its various fonns oflegalized gambling able limits only by strict regulation. Total sup­ are not solely responsible for the disease, it must pression has been unsuccessful; indeed, such accept a certain measure of responsibility for its I- 3 '------~----- • cure. the state income from betting, say legislators who feel guilty about pretending that gambling Although conducted only a few years ago, this is good, because the states have become depend­ study did not anticipate the problems emerging ent on the money, or because other states will from illegal use of video gaming devices. In the use casinos to lure their tourism. They have • commentary to its conclusions, the Governor's become hooked on gambling as a source of Commission stated: revenue as any compulsive gambler betting the milk money. This Commission has heard from law enforce­ ment experts in New Jersey who contend that le­ • • • • galized gaming has not only failed to curb illegal gambling but in fact has been conducive to its Because no one really knows how many illegal growth. While it may be surprising that the video gambling machines there are in New Jersey, availability of so many forms oflegal gaming in no one can say with any accuracy how much poten­ New Jersey has not cut into the appeal of the tial tax revenue the state would lose by not legaliz­ • illegal ga.TJ1bling business, this Commission ing, licensing and regulating the machines. Esti­ strongly suspects that whatever recent successes mates of potential revenue are therefore nothing but have been realized, illegal gambling, especially speculation or wishful thinking. Nor can anyone say the nUrJbers rackets and sports betting, remains for sure how much money organized crime makes a major problem. The reasons appear to be on the machines, although testimony before the SCI • several. First, illegal gambling is a mainstay of indicates it is virtually a torrent of cash, Only the organized crime groups. Numbers and sports mobsters know for sure, but they're not talking. book traffic, considered by many as basically an innocuous activity, is so deeply rooted in certain No one should delude himself into thinking that areas that it has become culturally acceptable as legalizing such games will have any but the slight­ • part of the local economy in some neighbor­ est impact on organized crime. Such action, how­ hoods. And finally, from a competi rive perspec­ ever, probably will create more gamblers. Certainly tive, illegal gambling offers better odds, easier it will make gambling easier and more convenient credit and confidentiality. for more people than driving to Atlantic City. In f&ct, it may even hurt the casinos financially. much • As with street crime, the impact of legal gaming as casinos have hurt the racetracks. in all of its forms on megal gambling may be an appropriate subject for further in-depth study as In the view of the Commission. therefore, video part of the State's continuing review of gaming amusement devices present an extremely difficult policy issues. law enforcement problem. But the possible solu­ • tions to the proliferation of machine.s which have Another view was expressed in an April 22, been designed for. or are easily converted to, illegal .1991, column by William SaflIC of The New York gambling devices, range from the impractical to the Times: Draconian. And even at that, none seems capable of even coming close to riddi11g the state completely of • ... [I]t is wrong for the state to exploit the weak­ an underground industry which will inevitably grow, ness of its citizens. It is the more unfair and devastate more lh es and put more money into the painful form of "painless" taxaticn .... And gam­ pockets of organized crime. bling taxation feeds on itself. We cannot give up

4 • • Because of the difficulty of the issues, this moral, social and public safety issues. But the document is unlike many prior SCI reports in that it Commission cautions tha~ .the arguments of both the makes no fum recommendations. In fact, the fiscal Pollyannas and the doomsday moralists should Commissioners themselves were of differing views be treated with equal skepticism and a final resolu­ about an ideal solution. Since the issues cut across tion based on the total impact on our state. For • so many different interests, the Commission be­ its part, the Commission will, in the pages that lieves that the Legislature and the Governor are the follow, attempt to aid that effort by describing the appropriate entities to resolve the complex policy gravity and complexity of the problem. And it will, considerations. The Commission therefore cannot in its conclusion to this report, identify various re­ overstate the need for them to undertake an immedi­ sponses which have been proposed, and offer obser­ • ate, ~omprehensive effort to attack this problem vations as to the efficacy of each. after:~"lefuliy weighing the complex economic, •

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THE LAW •

New Jerseyans are ambivalent about gambling. phases of any gambling activity, whether On the one hand, our 1947 State Constitution pro­ such activity consists of gambling between hibits gambling without specific authorization of persons or gambling by a person involving • the voters in a referendum. On the other hand, the theplayingofamachine .... NJ.S.A. 2C:37- Constitution has been amended seven times to per­ Ie. mit bingo, raffles, a state lottery and casino gaming. (pari-mutuel horse racing had been authorized prior A slot machine is defined as to the 1947 Constitution.) A referendum that would have allowed casinos to be built anywhere in the any mechanical, electrical or other device, • state was defeated in 1974. But a second referen­ contrivance or machine which, upon inser­ dum, narrowed to permit casinos only in Atlantic tion of a coin, token or similar object therein, City, was approved two years later. It appears, , or upon payment of any consideration what­ therefore, that while New Jerseyans want to gamble, soever, is available to play or operate, the· • they also want some limits on when and where th.ey play or operation of which, whether by rea- can do it. son of the skill of the operator or application of the element of chance, or both, may Yet the evidence is also clear that a substantial deliver or entitle the person playing oroper- number of our citizens believe that gambling is a ating the machine to receive cash or tokens • harmless diversion that should neither be circum­ to be exchanged for cash, whether the payoff scribed nor condemned. And many believe that is made automatically from the machine or organized crime is merely providing a service to in any other manner whatsoever. A device those who wish to gamble illegally, despite the so constructed, or readily adaptable or con- availability of numerous legal games of chance. By vertible to such use, is no less a slot machine • doing so, they provide the revenue that helps to feed because it is not in working order or because this cancer on the body politic. some mechanical act of manipulation or re- pair is required to accomplish its adaptation, The Legislature, time after time, has declared conversion or workability. NJ.S.A. 2C-37- organized crime to be a menace "to the political, If. ~ social and economic institutions of this State." NJ.S.A. 2C:41-2b-theracketeering statute. And A person who, the laws against illegal gambling are, for the most part, straightforward. with knowledge of the character thereof, manufactures, sells, transports, places or • New Jersey's criminal code defines a gambling possesses, or conducts or negotiates any device as transaction affecting or designed to affect ownership, custody. or use of a slot machine any device, machine, paraphernalia or equip­ or any other gambling device, believing that ment which is used or usable in the playing the same is to be used in the advancement of •

6 • • unlawful gambling activity become an integral part of illegal activity, in­ cluding, but not limited to, money which is is guilty of a disorderly persons offense. NJ.S.A. eannarked for use as financing for an illegal 2C:27 -7. Such devices are legal only in the casinos gambling enterprise. N.J.S.A. 2C:64-1.a(3). • in Atlantic City under strict regulation by the Divi­

sion of Gaming Enforcement and the Casino Con~ It Proceeds of illegal activities, including, but trol Commission. Violations of this section are pun­ not limited to, property or money obtained as a ishable by a maximum ofsix months injail and fines result of the sale of prima facie contraband as • up to $1,000. NJ.S.A.2C:37-7. well as proceeds of illegal gambling, prostitu­ tion l bribery and extortion. NJ.S.A. 2C:64- In addition to these offenses, illegal use of video l.a(4). gambling machines can be prosecuted as promoting gambling, NJ.S.A. 2C:37-2, punishable by up to When the State seeks to take title to property six months in jail and a fine up to $10,000, or main­ other than prima facie contraband, it must, in a civil • taining a gambling resort, N.J.S.A. 2C:37-4. pun­ action in Superior Court, show that the property was ishable by up to 18 months in jail and a fine up to used in criminal activity or was purchased with the $15.000. proceeds of such activity. In other words, the State must pr,ove the underlying crime alleged. But in a To the extent that prosecutors can prove organ­ civil action, the State's burden of proof is less • ized crime involvement in schemes involving the demanding than in a criminal proceeding, where a illegal distribution or use of such machines, viola­ defendant's liberty may be at stake. Forinstance, in tors are subject to the provisions of the racketeering , a civil trial, the State must prove its case only by a statute, which allows the imposition of severe eco­ "preponderance of the evidence" rather than the nomic penalties as well as substantial prison tenns. higher standard of "beyond a reasonable doubt," • which is required in a criminal prosecution. The law pertaining to forfeiture, NJ.S .A. 2C:64 et sec, provides greater potential economic punish­ Thus, the forfeiture statute provides prosecutors ment than do the gambling statutes. For instance, a more potent weapon against those involved in the • the forfeiture law designates any "illegally pos­ illegal use of video gaming machines than the sessed gambling device" as "prima facie contra­ gambling statutes. Although there will be details band," subject to seizure and in which no property later in the report about this issue, suffice it to say right exists. here that these machines have been placed in loca­ tions such as bars, candy stores and even funeral • In addition to the seizure of gambling devices, parlors. Under the forfeiture statute, therefore, the the State may also seek possession and title to: machines themselves are subject to seizure as prima facie contraband and the business establishments • All property which has been, or is intended from which they were seizeG are also subject to to be, utilized in furtherance of an unlawful forfeiture in a civil action. activity, including, but not limited to, convey­ ances intended to facilitate the perpetration of U sing this statute, the Attorney General's office illegal act~, or buildings or premises maintained on November 19, 1990,filedamajorcivilforfeiture for the purpose of committing offenses against action seeking to take title to Grayhound Electron­ the State. N.J.S.A.2C:64-1.a(2). ics, Inc. of Toms River, a manufacturer of amuse­ • ment games. The complaint alleges that the finn • Property which has become or is intended to was "created by and is controlled by associates or'

7 • the La Cosa N ostra family of Nicod~mo Scarfo and machines. He gave half to the owners and took the • their designees. rest to Grayhound offices. According to the complaint, Grayhound manu­ factured or assembled video slot and poker devices Every two weeks, George Fresolone, once an as­ and distributed them to firms in New Jersey as well sociate but later a member of the Scarfo family, as in Philadelphia, California, Florida, Michigan visited Grayhound and picked up half the money • and N~~w York. These distributors, in tum, placed Cifelli had turned in earlier. This money, or 25 per the machines in establishments where they were cent of the total proceeds of each machine, was used illegally as gambling devices. Law enforce­ turned over to Nicodemo Scarfo, Jr., whose father, ment agents in those states have taken action against the family boss, is now in federal prison on extor­ such establishments and have seized the machines. tion, racketeering and murder charges. • The complaint alleges that revenue from the devices was shared equally between owners of es­ tablishments and the distributor of the machines who, in turn, gave half his sharetotheScanofamily. • According to the complaint, Alan Cifelli, a repre­ sentative of the distributor, B & C, visited each establishment weekly to take the money out of the •

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8 • • II

• THE MACHINES

While the wording of the statutes may be clear, with "dual capabilities" permitting them to be used • practical applications in law enforcement have run either as amusement games or gambling devices. head-on against rapidly advancing technology. To Many can be switched remotely from one mode to understand the problem, however, one must under­ the other "to avoid detection and prosecution of the stand the types of machiner. and their potential uses. illegal gambling." In the gambling mode, players The machines are categorized here based on the type buy credits which are displayed on the device and • of regulation. which are won or lost as play progresses. Unplayed credits are paid off in cash by the person running the The clearest category is that of slot machines establishment; these unplayed credits can be "knocked that are legal in Atlantic City and are, of course, off' by the establishment to return the machines to tightly regulated. A second category is that of the zero after the payouts. But the machines have an • amusement-only machines operated at boardwalk internal accounting program to keep track of plays, arcades and some amusement parks. These are as well as credits earned and paid, so that revenue licensed and regulated by the Director of the Divi­ can be calculated. The devices can also be adjusted sion of Alcoholic Beverage Control (ABC) who, by internally to regulate the percentage of winning statute, also serves as the Amusement Games of hands. They also have bill acceptor devices so that • Chance Control Commissioner. These machines players may buy credits directly from the machines include the cranes that pick up toys, skill ball and with bills as large as $100. The forfeiture complaint others, as well as various video games such as Pac­ is pending in Superior Court. Man and draw poker. The third category includes all the other machines - the ones in shopping In legal, regulated amusement games, a player • center arcades, bars and illegal gambling parlors. can "bet" credits on the outcome of a poker hand, for example, and receive additional credits if he wins. Testimony at the SCI hearing revealed that Credits can either be used to play more games or games such as Joker Poker, Draw Poker, Top Draw, exchanged for tokens or merchandise. The cash Grand Prix, keno and eight liners, all of which are value of the merchandise is limited by state regula­ • conducive to gambling, are being used as gambling tion at no more than $500. The tokens cannot devices. Some machines may be changed from, say, lawfully be exchanged for cash. This is the most PAC-Man into one of these other games by a switch obvious legal difference from a slot machine. The or a remote control device. Police cannot seize such law thus allows people to amuse themselves in video machines as illegal gambling devices unless they arcades with winnings which differ more in degree • see them being used illegally - that is, being used than in kind from those offered by slot machines. to generate cash payoffs. Any machine used outside the confines of the regu­ lated amusement parks or boardwalks would be One method by which the machines are used illegal if used to payout any money or prizes. illegally is detailed in the forfeiture complaint filed • by the Attorney General's office. For instance, the While video games vary, the cabinets holding machines contain electronic boards programmed them are essentially identical. The key components

9 • are simply a box holding a flashy TV-like screen nesses before the Commission showed that win • with internal electronics that cause the machine to ratios for illegal video gam bling machines hovered operate as well as provide bells, whistles, lights and in the area of 50 per cent.. It also determines whether other effects. There is at present no statewide a machine has features which allow it to be used for regulation of all amusement-only machines. The gambling. EPROMs provide one key to controlling SCI is unaware of any reliable estimate of the illegal use. The DGE lab verifies tl1e program of number of video machines in operation, where they every EPROM used in casino slot machines. Each • are located or how much money is made from them. EPROM has unique identifiers which are cataloged as the device's "fingerprint". Once installed in the Atlantic City casinos, on the other hand, have machine, the EPROM is sealed and its exact geo­ approximately 23,000 slot machines in operation at graphic location is tracked. If the seal is tampered any given time. Slot machines provide the majority with, the machine no longer has integrity. • of casino industry revenue. Licensed manufacturers of slot machines sell their products to the casinos. Many machines are turned over by the casinos The Division of Gaming Enforcement (DGE) main­ every year as old machines are replaced with new tains a comprehensively staffed and equipped labo­ ones. Once a machine is mustered out of a casino, ratory within blocks of Atlantic City's casinos to the DGE lab no longer has an interest in it and ceases • "fmgerprint," test and track all slot machines in the tracking it. The machines are frequently recycled as casinos. amusement-only machines with new, different EPROMs. However, if an EPROM that is pro­ Video gaming devices are relatively simple by grammed for gam bling is installed in a refurbished current measures of technological complexity. At device from a casino, that device can operate ille­ • its public hearing, the Commission heard testimony gally as a slot machine. from State Police Captain Stefano Gelardi, who heads the DGE laboratory. A slot machine expert, It is important to realize that the machines used Captain Gelardi demonstrated the operation both of legally in arcades can be and are used to gamble. a slot machine and of his lab's testing equipment. The features which are essential for an operator to • use the device in an arcade are the same features Gelardi testified that the only visible difference which allow the device to be used for illegal gam­ between a slot machine and a modem video gaming bling. The machine is not "bad" and not per se device used illegally is that the slot machine has a illegal. It is the manner of its use which brings it tray into which winnings drop; the illegal video under the criminal law. • gaming device does not. Because there is no tray into which the winnings may drop, the video game It is also important to remember that these used illegally needs to be manned by someone who devices will look the same whether used legally or will make the payoffs to the players. If there is no illegally. The outside of the box will not give away payoff, there is no crime. its use. If an inquisitive police officer opened up • the box, all he would see would be circuitry com­ Captain Gelardi told the Commission that the mon both to legal and illegal machines. heart of each slot/video machine is an "erasable programmable read-only memory" chip - an Captain Gelardi emphasized that prevention of EPROM, which controls all the essential functions slot machine crimes (and by inference those involv­ • of the machine. The EPROM determines the win ing their electronic counterpart video gaming de­ ratio, which by law must be 83 per cent in the vices) is so difficult that it is not even attempted. casinos. On the other hand, testimony from wit- Instead, the DGE lab has developed means of de- • 10 • • teeting a crime after it has been committed. Viola­ lab presently functions is limited - a small num ber tors are punished, usuaily with administrative sanc­ of highly regulated casinos with large investments tions, which are often more devastating for a casino at stake, all located within a small geographic area • licensee than criminal penalties. Bear in mind, and all using machines manufactured by a few com­ however, that the environment in which the DGE panies. •

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11 • III • THE MOB •

The fIrst witness before the Commission was twenties counterparts, also participate in re­ Assistant Attorn~y General Robert Carroll. Carroll lated conspiratorial criminal activities such as has been in law enforcement for almost 17 years extortion, theft, physical assaults, bribery, offi­ • during which he has worked for the Essex County cial misconduct, criminal usury or loan-shark­ Prosecutor and the Attorney General. When he left ing and even murder to protect their illicit op­ Essex County, he became Chief of Special Prosecu­ erations. tions in the Division of Criminal Justice, investigat­ ing racketeering and organized crime. He is now Why A Priority? • Chief of the Organized Crime and Racketeering Bureau. Carroll told the Commission how illegal video gambling first came to his attention. Carroll related to the Commission his early involvement in Project Ocean, a 1985 investigation In the early 1980s ... we started to receive infor­ • begun by the Essex County Prosecutor's Office and mationfrom citizens within I Essex] county, par­ subsequently joined by the New Jersey State Police. ticularly parents of juveniles who started to He began with an historical outline. He was ques­ complain that there were these video slot ma­ tioned by SCI Executive Director James 1. Morley. chines which, at that time, were generically known as Joker Poker machines. • In the early 1980s, law enforcement detected a resurgence of the use of sophisticated equip­ ment as slot machines and gambling devices. Those parents would contact our office and ask This activity bore a striking resemblance to the about ... the legality of the machines, and sec­ racketeering activities of the 1920s and ' 30s, ondly, what could be done about having age which centered on the one-armed bandit me­ limitations put on so that their children could • chanical slot machine. not be sucked into becoming habitual and com­ pulsive gamblers at an early age. Carroll described the early responses of the • It is interesting to note that the modern day Prosecutor's office to these complaints. criminal enterprises which operate video gam­ bling devices also trace their ancestral origin to From a priority point ofview, it's not something the outlaw groups which terrorized the United that looks terribly attractive. However, when we States earlier in this century. Members of the started receiving multiple complaints, and at the • Genovese/Gambino/Lucchese and Bruno I now same time, we had agents out there working, Scarfo] crime families not only still exist, but doing surveillances oftraditional organized crime have rediscovered the lucrative slot machine gambling operations and we started to see over­ market. These enterprises, like their roaring lays and patterns, we would observe that the persons who were involved in picking up tradi- • 12 • • tional lottery and bookmaking activity would The tack that wefollowed through Project Ocean also be making stops at these video poker ma~ and in later investigations when we would have chines and making pickups, and these are per­ an undercover agent go in, frequent a place for sons who had long records of organized crime a day or two and then play a machine, hopefully • association. befortunate enough to accumulate some credits and be paid off by the bartender or shopkeeper, So combining the two factors, the organized and the credits would be knocked off It was at crime participation that we suspected at the be­ that point that we felt we had satisfied the ginning, coupled with the citizen complaints, we elements ofa gambling offense. Beyond that, it • decided that we should take a good, long, hard was the more traditional types of investigative look at the problem to determine what was this techniques that had to be used. We had to do new form of gambling that seemed to be prolif­ visual surveillances, we had to follow the per­ erating. sons who made the pickups on the money, utilize electronic surveillance, we had to take the li­ • Carroll said the office recognized early that on a cense plates and do the legwork and everything transactional basis alone, video gaming offenses did else. It was very, very resource consuming, if not merit a substantial commitment of law enforce­ that's a proper characterization. But because of ment resources. However, because video gaming the presence ofa lot ofthese documented crimi­ devices were apparently employed by organized nal Jig ures, we felt that it was necessary to do so. • crime to victimize minors, the benefits of prosecu­ tion outweighed the cost. As he discovered, how­ ever, the machines were more numerous than at first thought, and the investment in police resources You can imagine, you know, how much it would increased. Undercover State Police detectives and cost if we had to send undercovers into every • Essex County investigators began to play the ma­ store that has a machine in this state and try to chines in candy stores, liquor stores, social clu bs and make a case. Necessarily, we've confined our­ wherever else they could be found. selves to the larger enterprises, but it's ex­ tremely diffiCUlt to make these cases. We went so far as to establish a sting operation • front business known as Jedi Vending, and by Project Ocean thus revealed for the first time use ofthat we were able to make incursions into that persons affiliated with organized crime were the organized crime control and networking that deeply involved in the video gaming business. Carroll we suspected existed. testified:

We used extensively electronic surveillance, and What has to be emphasized here is that this is not I might add, without electronic surveillance, simply an isolated problem; that is, someone Project Ocean could not have succeeded. playing a slot machine on their own and some­ one happening to profit over it. What I'm Because there is no judicial interpretation ofthe talking about ... here has been the unification of • law which allows law enforcement personnel to the organized criminal networks and the enter­ identify video gaming devices as slot machines, prises into this area which bring with it the the devices could not be deemed per se illegal. violence, the conversion pfthe gambling-devel­ As a consequence, Project Ocean forces were oped money into the narcotics purchasing compelled to prove that the devices were used to power.... This is one of the sources of their life I • gamble with. blood.

13 • Territoriality was ... enforced. Tributes had to of organized crime in the operation of video gaming • be paid if you went into another person's area devices. and that person had no connection with you at all. There would have to be sit-downs and • Joseph Fay operated a vending machine dis­ meetings among representatives of the organ­ tribution company in Essex and Passaic Counties. ized crime networks so that they could work out Fay was not a member or an associate'of an organ­ • how the profit would be divided .... ized crime family but was more of a victim, even though he profited from the association. He broke MR. MORLEY: the law and cooperated with organized crime members in the distribution of video gaming devices. Through Do you conclude from the fact that the territo­ a high school acquaintance, Fay came under the • ries are so closely and jealously guarded by domination of a particularly ruthless man named these groups ... that these machines present a Robert Bisaccia, known on the street as "Cabert." significant income potential to organized crime? Cabert was identified in the SCI's 1989 Annual Report as a powerful member of the Gambino/Gotti MR.CARROU: LCN family and its most significant figure in New • Jersey. For security reasons, Fay's testimony had Without question .... this new form lof gambling] been video-taped beforehand and played in the is very lucrative. It provides them with even less hearing room. He was questioned by Counsel James exposure, and that' s something organized crimi­ F. Villere, Jr. nal networks are always concerned with - ex­ • posure, both public exposure and criminal ex­ • John Januska was well integrated into the posure. When you can do something in an elec­ , Bruno/Scarfo family. He testified that he would tronic medium -- derive great profits from it .­ have been "made" a sworn member ofthe organiza­ and never have to go down and touch the ma­ tion had he been of Italian rather than Polish extrac­ chine, you've achieved a prerty good degree of tion. (Being "made" describes a ritualistic rite of • insulation. And that's the type of thing that we passage from mere "association" with to member­ have to penetrate in order to make the cases ship in an organized crime family.) Januska distrib­ against these people who are involved in this uted and received profits from video gaming de­ type of activity. vices and he engaged in some of the activities identified by Carroll. Januska testified from a • * * * remote location, with his voice and video image disguised for security reasons. The questioning was The profits were so great, in fact, that organized conducted by SCI Deputy Director Robert J. Clark. crime families vied with one another for control of video game manufacturing companies. At least one • George Fresolone was a "made" member of • murder was committed because an organized crime the Bruno/Scarfo crime family who acted in a mana­ figure refused to share the tribute from one of these gerial role within the organization and oversaw the companies with his mob superiors. operations of a corrupt manufacturer/distributor of video gaming devices. He testified about the reve­ Despite traditional efforts by the organized crime nue which could be had from those devices. Like • bosses to insulate themselves from daily street ac­ Januska, Fresolone testified from a remote location, tivities, there. were witnesses who could break down responding to questions from Counsel Villere. the insulation. The Commission heard from three who had frrst-hand experience with the involvement • 14 • • How Organized Crime Moves In quickly that Bisaccia did not IIgive" anything. In fact Bisaccia eventually made himself a "partner" in Fay testified he had been in the vending machine the enterprise. business for about a year when he was invited to a • social cl ub in Essex County to meet "Cabert" (Bisac­ cia). Fay related that Bisaccia told him he had been Fay Has To Pay - Dearly summoned because, while canvassing for new loca­ tions for his vending machines, he had approached Unfortunately for Fay, the primary beneficiary businesses where Bisaccia already had the account. of this partnership was Bisaccia. Fay learned within • Asked if he was told the consequences of such a few weeks that he would be required to make competitive activities, Fay responded that Bisaccia payments to the mobsters. There was no schedule or told him his (Fay's) legs would be broken. procedure followed. Whenever Bisaccia wanted money, wherever he happened to be at the time, he Q. While you were meeting with Cabert were would contact Fay for payment • you developing any feelings about who in gen­ eral terms he might be or about his background Q. Did you and Scocca ever discuss between or his lifestyle? yourselves about what this money was for? A. At that point, I really couldn' tfigure him out, A. Not really. IfitwasforBobby,youdidn'task you know. I really didn't know what was going any questions. • on then, but I justfigured he owned the vending company. Q. Why did you bring that money to Bobby ... somebody you hardly knew ... ? Q. Did you ever have any conversations with A. Because I didn' 1 want to get my legs broken. anybody,for example, Scocca [Fay's high sclwol • friend, Dominick Scocca] or anybody else, to Q. You were afraid of him, then? confirm, to help you identify what Cabert was A. Yes. all about? A. Yes, later on I finally figured it out. Q. Did you consider any alternative to doing business with Cabert? • Q. How did you fig ure it out? A. Yes, but I didn't know how [to do it}. A. Well, just by being around him and the people, you know. They would call him the boss and you know,just-after awhile, you knew. Q. Do you recall what kind ofarrangement you • Q. Did you have any other conversations with typically had with the owner ofany ofthe loca­ Cabert on that day or any other day regarding tions where you had the machines? your staying away from his locations and him A. 50/50 split on the profits at the end of the telling you what would happen ifyou didn't? .... week .... What did he tell you? • A. IIThese are my locations and ifanybody goes Q. Did you negotiate ever with anybody about in there they are going to have a problem." the percentage or was it always SO/50? A. Always 50/50. People tried to get 60/40 but Fay testified, "he [Bisaccia] thought I was a real J only did 50/50. nice guy and he liked me and any locations that he • didn't want, he would just give to me." Fay learned Q. From the time that you first began your

15 • business up until early 1985, what was the peak to accept paper currency instead of just quarters, • number of locations that you had at any lime? however, his receipts increased. His top week, his A. 60,70. share was between $35,000 and $36,000. Fay was asked to estimate how much money he paid to Q. How much money - again, we're talking Cabert over the term of their relationship. about prior to 1985 - were you taking home • after you made the split and taking care ofyour A. Just estimating, I don't know- $600,000- other expenses? $700,000-maybe more, I don't know. A. About $500. Q. Do you recall the largest [single] payment Q. And that's on a weekly basis? that you ever made to Cabert? A. Yes. •

Q. How much money were you making after you had taken care of the locations? A. $10,000. A. Gross? Q. Did it alwaysfollow that you'd get a phone • Q. Yes. call from Scocca who would tell you that you A. About $10,000. had to make a payment? A. Just in the beginning. . Q. Whatkindofexpensesdidyouhaveafteryou paid off the locations? Q. Didyoualways make these payments directly • A. Well, you always had to buy new machines, to Bobby, whether he came to you or you went to and you had to repair the machines, give money him, did it always mean that you made the for contracts, vehicles, gas, payroll and the big payments to him directly, or to someone else? one was Bobby. That was the big expense. A. Well,l knewlmade the payment even ijl gave it to somebody else. I knew that Bobby would get • Q. When you say you had to give money for it because, you know, my beeper would stop contracts, what do you mean by that? beeping. He would beep me so much J'd go A. Well, after awhile, in the beginning. we were through 3-4 batteries a day until J'd bring him able to put these Joker Poker machines out any­ the money. He'd call me, I just couldn't hide, where, see, and after the people knew that it was you know. It's unbelievable. • so lucrative, the vendors would start giving out bonuses or gifts. It started out $1,000 for a year Q. Did he call you personally? contract and then it got up to $10-$20,000 they A. Sometimes. would give the locationjust to get in there, to put our machines in. Q. Did he have other people call you, too? • A. Yes. Q. So did it end up that at most locations you had to provide some money up front in addition Q. Did Cabert find any other locations for you to the split in order to get in? beyond the two ... that we just spoke about? A. Towards the end, every location. Yes. A. Afew... eight or 10. •

From a gross of $10,000 per week, Fay was Q. Would you consider the locations that Bobby netting only $500. Once his machines were adapted found for you to be good locations? • 16 • • A. Maybe one or two. gottenfor you? ... A. Any location I had.

Q. Over the course of years, you had business Q. All you had to do is mention his name andyou • with himfor seven or eight years, and you gave got help? him six or seven or eight hundred thousand A. I got what I wanted. {dol/ars] and you also said that out of that you got only one good location, is that correct? A. One that I thought was good, yeah .... I had • other good locations. Q. Did you ever use Caberl's name when you went into a place to get a stop I a location where Q. But they were notfrom Bobby? a device was installed]? A. Definitely not. Why would he give them to A. Yes. me? • Q. Didyou ever use Cabert's name to take away a stop when somebody else already had it? Unfair Advantage A. Yes.

Despite the drawbacks, Fay learned that, in cer­ Q. 'To your knowledge, was the use ofCaberI' s • tain circumstances, he could benefit from the rela­ name ever successful in enabling you to take tionship. This once legitimate businessman even­ away a stop from some other businessman with tually adopted practices that reduced competition organized crime connections? between himself and his fellow vendors and gave A. Every time. him an unfair advantage over the shopowners with • whom he did business. Q. Even though that other businessman who had that prior location had organized crime af­ Q. Did you ever have to ask Caberr for assis­ filiation himself, you were still able to take it tance in connection with keeping a location or to away? keep somebody else from trying to move into one A. If he was affiliated with Bobby I Bisaccia] ? • ofyour locations? A. Yes. Q. Yes. A. I would not try and get that location. Q. How often did that happen? A. Once a month or so, it depends, you know. Q. Ifhe was affiliated with somebody else, then, • It could be two in a month and then three months what would happen when you used Cabert's go by-say an average of once a month. name? A. Then I would get the location. Q. On those occasions when you did have an opportunity to ask him for ~ds help, was it effec­ Q. Did you ever have any understanding about • tive? territorial rights for organized crime? A. Yes. A. Well, I knew Bobby's area and that's just the same area I operated in. Q. Were you able to invoke his assistance in regard to locations that you had gotten yourself Q. Other people {were] in different areas and • in or was it limited only to those which he had you didn't go into those areas, then?

17 • A. {That is correct.] was owned by Carmen Ricci and Brian Petaccio. • Q. How did you learn that? How did you know Q. Do you know if {Bruno/Scarfo associa:ej what was Bobby's area? Alan Cifelli was the only one who was running A. Well, he used to tell me that, you know, that a route/or stops in the South Philadelphia area is his territory - Bloomfield, Belleville, New­ for Grayhound? • ark. A. No, he wasn't. In/act ... Carmen's brother has ... a route out there, and there must be a lot Assistant Attorney General Carroll summarized more people that have routes. I know Carmen's the competitive effect of activities, as practiced by Wife in Florida has the biggest route o/them all. Bisaccia, on legitimate businesses. Q. How did you come to know about that • An illegal enterprise's control over these type 0/ Florida route? machines and the territories that they're operat­ A. Well, a couple years back, ... Iwas in Florida ing restricts the development o/legitimate vend­ with Pat Martirano {a now deceased high-rank­ ing companies. Frankly, ifa particular organ­ ing member o/the Bruno/Scarfo crime/amilyj, ized crime-backed distributor is in a particular and we were in Hollywood, and we were on the • area, it's almost impossible for a legitimate beach one day, and we were going into this diner vendor to open a business and start by distribut­ right on the beach, and there was Grayhound ing machines, legitimate amusement machines, Joker, Poker sitting there. I even said to Pat, in that area. ItLookat this. Grayhoundis even down here." ... {Sjo ... during my involvement with Carmen, I • had brought that up to him, and he said to me How Big An Industry? that his wife has a company down there, A & G, and he's the one that told me that she has the As knowledgeable as he was about the business, biggest route o/them all. Fay had difficulty in assessing the size of the illegal • enterprise.

Q. Do you have any idea how many illegal ma­ Q. Do you have any idea how many illegal video chines are locaredin New Je rsey and where they gambling machines are in operation in New are concentrated? Jersey right now? • A. I don't know how many-the concentration A. God only knows. is Newark and Paterson. I don't know how many now but back when I was still there, there had to Q. Is there any way to know? be {a total of] 10,000 machines. A. 1/1 had to guess, I would say thousands. • George Fresolone, the "made" member of the Q. Why do you say that there ar~ tlwusands: .. ? Bruno/Scarfo crime family, had similar difficulty in A. Well, ... you go topoorerareaso/these cities grasping the full revenue picture. He was helpful like Elizabeth, Newark, Paterson, Trenton and through his personal experience in providing infor­ walk in these stores and you would see a lot 0/ mation about the southern part of the state - and these-a lot 0/ these games.... I mean, just in • elsewhere. He answered questions about the opera­ "Down Neck" alone, every store J walk in on tions of Grayhound Electronics, which manufac­ Ferry Street has got them, and out o/the small tured, sold or distributed video gaming devices and radius 0/ maybe seven, eight blocks, you're • 18 • • talking- maybe you got a hundred machines Grayhound Electronics. As Fresolone's testimony there .... revealed, more money could be made from distribu­ tion than from sales. Q. In your experience, do the people who play • these machines in these poor neighborhoods [Carmen Ricci of Gray hound Electronics}, had end up making out on the playing of these ma­ to be making at least Jive or six hundred [do/­ chines? lars] on the [sale of a] machin~> so take a A. No, it's utterly impossible. What happens is, machine like that, it would cost like 1,200 to it works on a percentage basis. If you put in 10 build. For $12,000,you build 10 machines, and • dollars, you're getting back-actually you're those machines, if you put them in good loca­ getting back, if you' re working on 55 per cent, tions, they can do four or five thousand dollars you're getting back 45 per cent ofyour money .... a machine, so - in the course of a week, so the If you put in the four and a half dollars, you machine does four thousand a week, and you're know, then they're going to take 55 per cent of earning two ofthe four thousand, andyou got 10 • that, so eventually, ifyou keep playing, you lose ofthem out there, you're earning a lot ofmoney, the whole 100 per cent that you put in. Utterly so you can build a lot ofmachines mighty quick. impossible. Fresolone helped describe the path the illegal * * * video gaming revenue took,through the enterprise. • He used as an example another Bruno/Scarfo family By all conventional measures~ Project Ocean, member. the fIrst large scale law enforcement attack on illegal video gaming, was a success. The areas of Q. Are you familiar with an individual named activity described by Fay and Fresolone were tar­ Joseph Sodano? • geted. The tally reported by Assistant Attorney A. Yes, I am. General Carroll was heartening. Q. How is it that you know Mr. Sodano? As a result of the Project Ocean effort ... on A. Mr. Sodano is a made member ofthe Brunol March 25,1985,500 law enforcement officers Scarfo crimefami/y. • seize[ d] approximately 400 video gambling devices. We seized approximately $100,000 in Q. Do you know ifMr. Sodano has any involve­ cash and vehicles and related property. We ment with video gambling machines or slot arrested 70 persons. We charged them with a machines? variety of crimes ranging from simple promot­ A. Yes, he does. • ing of gambling to extortion, criminal usury, bribery, misconduct in office and conspiracy .... Q. Do you know where they may be? We later returned 10 State Grand Jury indict­ A. North Jersey and New York. ments .... Q. And does he have both video gambling • This successful prosecution revealed the finan­ machines and slot machines in New Jersey or­ cial potential of the illegal video gaming industry. do you know how he distributes his business, in Although precise revenue figures are obviously not other words? available, inferences can be drawn that the sums are A. Well, in New York, he's got the slot ma­ enonnous. Fresolone was able to give the Commis­ chines; in New Jersey, he's got the video ma­ • sion a picture of revenue from one distributor, chines ... just for the simple reason, I mean,

19 • there's no difference- there's no difference in was going to send down one of his boys to work • the game except that the one has I a place} where with me. the money comes out, that makes it a slot ma­ chine. The other one is where the credits is, Q. To help you? same game, but one has the return on it. A. To work with me. • Q. So ifit's got a bin where the coins come out, Q. And did he send somebody to work with you? it's a slot machine, and if it doesn't, it's a video A. On Monday morning, he sent Buddy Mucci­ gambling machine, is that correct? grasso. A. That's correct. Q. Did you stay around to have somebody work • Q. How large was the monthly tribute that was wihyou? generally turned over ... ? A. No, I disappeared. A. Okay, let me explain that to you. The boss received 4,000 I dollars} a month, and out a/the Q. How long did you disappear for? 4,000 a month, Joey Sodano paid 3 ,000 ofit, and A. Around three weeks. that was apartfrom his gambling, his video ma­ • chines and his bookmaking operation. Q. Did you hide from Mr. Muccigrasso and from Bobby for that period of time? A. };es. It's Hard to Leave Q. After three weeks, tlwugh, you came back, • In 1985, Fay had a change of hean about the you surfaced, right? manner in which he was making his living. He was A. Well, I came back because he had one ofmy arrested for operating a joker poker game, a disor­ mechanics and he was holding him for ransom derly persons offense for which he received only a until I came, at the Finish Line I a restaurant and $500 fine and probation. But it was enough of a bar in Newark}. He was threatening to break his • shock. Although resolved to get out of the business, legs, or whatever. he learned that he could not just walk away.

Q. Following your arrest and the disposition of the criminal charges, did you try to get out ofthe Q. Once you got word that they were holding • business? one ofyour guys hostage, you went down there A. Yes. to meet them? A. Yes. Q. Were you concerned aboul being arrested again, then? Q. What happened as a result ofthat meeting? • A. Yeah, I didn't want to go through that again. A. They told me ifl didn't cooperate he's going I didn't want to get into any trouble after that .... to take over the business. I didn't want to go to jail. That's a good motivation. Q. Who told you that? A. Cabert. • Q. Did you speak to Bobby about this? A. Yeah, I told him that I didn't want to do the Q. Did you get paid for that interest in the business anymore and he told me I had to and he business that he said he was going to take over? • 20 • • A. No. Q. Did you end up doing that? A. Yes. Q. Did you continue to have any obligations with respect to the business? Q. How long did it take you to build the business • A. We made a contract up that he would take back? over the business and all the loans and machine A. About one year. payments and truck insurance and truck pay­ ments and all that and I was not supposed to have any responsibility but they turned the busi­ • ness into their name but not the payments, so I Q. After you sold the business and gave the had to keep paying these payments. money to Bobby, didyou ever gJt back into the business yourself! Q. I gather you were personally obligated then A. Well, I was building up a few stops on my on these loans? own, on the side. • A. Yes. Q. Where was that? A. Paterson. Organized Crime Needs Outside Help Q. 'You had said earlier that Bobby had a certain • During his years in the business, Fay had ac­ area. Was Paterson beyond Bobby's reach quired skills that Bisaccia' s associates did not have. then? Despite their unfair advantages, they ran the busi­ A. He didn't really go into Paterson so he didn't ness into the ground. About a year after he left the know what I had going on over there. business, Fay received a call. • Q. About how many stops didyou end up putting Bobby called me up and he wanted to see me. I together in Paterson? went down to see him and he said that the A. I don't know-Cl.t the end, around 100. business I gave him was a piece of garbage, he said. He lost almost all his locations, which I • don't know how. Well, he had this guy Domin­ Once You're Hooked ... ick running the business .... and he just ran the business down. See, Bobby was just lookingfor Fay soon learned that Bisaccia was not unique in the money, he wouldn't get involved, you know, his venality or his ruthlessness. in the actual working afthe business. He would • pick someone to run it for him. And this kid Q. After you put together this business in messed the whole business up and by the time he Paterson, did you have an experience with any­ found out, it was gone. He had 20 locations left. body else along the same lines of your experi­ ence with Cabert? Q. So it was up to you to build the business back A. J was approached by Johnny Ventura .... a • up again. buinessmanfrom Paterson. A. Well, he wanted to go back and be partners and I told him that J didn't want to do that but Q. Didyou know him before he came to see you? what J would do was take the business back, A. No. build it up, sell it and give him all the money and • that would be it - see you later.

21 • • Q. What did he say to you when he first ap­ Q. Did he call you up, or did he meet with you proached you? again, or what? A. He told me if 1 was going to operate in A. ] met with him outside Johnny Wmtura's Paterson,] had to pay the right people .... tavern in Paterson. • Q. Did he tell you who those people were? Q. What did Perna tell you then? A. Himself, Michael Perna. A. He told me he talked to Bobby and Bobby gave me the Good Housekeeping seal and I was Q. Were you aware at the time that Michael okay to operate with him. Perna was a member of the Lucchese/Corallo • {organized crime] family? Q. Did you then have to make payments to A. Yes. Perna? A. Yes. Q. How about Johnny Ventura? A. Yes .... 1 didn't know when 1 first met them,l Q. Was it the same kind ofarrangement that you • didn't know who they were but you quickly find had previously enjoyed with Cabert? out when you're operating in the streets. A. Not exactly the same kind of arrangement. This would be every week instead of anytime Q. Exactly how did your meeting come about Bobl;y felt like it, this would be -I can't re­ with these people? member-one day during the week, every week. A. 1 was going, taking care ofbusiness like usual • and 1 had a salesman and he said he knew Q. So you didn't burn out the batteries in your Johnny \!enrura and Johnny called him or stopped beeper this time? him on the street and said he wanted to see me, A. Right, because I knew what day to be there so 1 met Johnny Ventura at the 21 Club in and what time. Paterson. • Q. How much were you paying Perna weekly at Q. Didyou eventually have a meeting then with the beginning? Michael Perna? A. $500 to Iltart. A. ] think it was a day or two later. Q. Did it increase later? • Q. What did you discuss with Perna at this A. Yes, to $1,000. meeting? A. 1 told him that 1 was with Bobby, Cabert, and Perna and Ventura may have been slightly less I didn' ,r know ifI could move into another family, greedy than Bisaccia but gave up nothing to him in like,just change overnight. And he told me that ruthlessness. Fay testified about how subordinates he'd get in touch with Bobby and check me were educated. out .... Q. Did you receive any threats from Perna or Q. Did he do that? Ventura? In other words, did they tell you that A. Yes. you had to worry about what they might do to • you, too? Q. Do you recall how much later it was? A. Well, yeah, it was a way of life, you know. A. Nextday. • 22 • • Q. Did anybody ever make an example ofyou or a legitimate business. provide any illustrations of what might happen if you stepped out of line? I'm interested in how the machines get into the A. Well, Johnny Ventura went out and they store in thefirst place. In other words, does the • robbed a lot of machines from another vendor. store owner learn about these machines and They busted them up and all that and said, USee then get in touch with the distributor on behalfof ifyou , re not with us, this is what could happen." the vending company or does organized crime playa role right at the outset in gelling these ma­ Q. Did they ever do anything to you inparticu­ chines into the store? ,:ar? • A. No, not them-I was giving them money. A. There are various ways.... On occasion a store owner, hearing ofthe potential profitabil­ ity ofthese machines, will call up a distribUlOr ... Jn An Additional Wrinkle most cases, a store might have a cigarette ma­ chine in it and the person who distributes the • The Fay!Perna!Ventura relationship went be­ cigarette machine, he may say, "I can get you a yond video gaming devices. joker poker "or" I can get you a Grand Prix" or whatever the term ofart that is currently preva­ Q. At any time during your meetings with Perna len(, and "/,ll bring you one," and he does it, or Ventura, did you have discussions about and it starts - it can come either way, from a • loansharking? shopkeeper to the vendor, from the vendor offer­ A. Yes. ing it to the shopkeeper.

Q. What were you told? But there are more nefarious ways that they get A. He told me instead of giving these people into stores. People can be loaned money by a • bonuses, the money for contracts for the loca­ vendor. A person could be in arrears in his re­ tions, you come and tell me what they want and payment schedule. The vendor could then say, we'll go and take care of it. So he told me, you "In order to enhance your ability to pay me know, uDon't give any money out before you back, you're going to put' a gambling device in talk to us." there." And the device is placed, and sure • enough, the profit will come and everybody will Q. Do you know what ended up happening be happy except, ofcourse, now you have illegal between Perna andlor Ventura whenever they gambling in your store and you're risking your talked to these people at any ofthese locations? store, you've corrupted your commercial envi­ A. U suaUy they'd give them the money and ronment, and our experience shows you would • charge interest every week. tend to attract persons who would not necessar­ ily be in the best interests o/your .business. Q. So then it was a loan of a son, then, right? Did you ever collect any ofthe interest payments There have also been situations where machines yourself? are placed in premises where a person is simply • A. Yes. afront.... There's no other legitimate commer­ cial operation going on except a gambling ar­ At the public hearing, Commissioner W. Hunt cade. Dumont asked Assistant Attorney General Carroll about the mechanics of bringing illegal devices into

23 I • The Breaking Point tronics. Ricci and Petaccio not only manufactured • the devices, they distributed them in South Jersey Fay mistakenly thought that Perna and Ventura and Philadelphia through a company called B & C provided cover. Instead, his troubles worsened. Enterprises.

Q. Once Perna told you that he and Bobby Scarfo suspected that Ricci and Petaccio were • Cabert had worked out a deal with you, were you cheating him, and he assigned Fresolone to collect off the hook with Bobby? tribute from them and to learn as much as he could A. I thought I was. about their operation. Fresolone testified about the protocols and procedures of this illegal business. Q. Did you find out otherwise? • A. A few days later, I had to make another Q. With regard to the arrangements they had payment to Bobby. with store owners, do you know ifthere were any negotiations with the store owners about the Q. Do you remember how much you had to pay payout or the percentage that the store was to Bobby at this time? get? • A. There were so many times,! can't remember A. No, that's a setfee. There's no negotiation how much it was. with the store owners. They -you put a ma­ chine in their location and they are entitled to 50 Q. Did this, then, become the time when you pel'Cent of what the machine makes. became an active agentfor law enforcement? • A. Yes. Q. Did this arrangement with the store owner extend into any aspect of the store owner's lia­ Q. Did you set up meetings with Perna and bility,for example, ifa store owner had a liquor Ventura on behalf of law enforcement? license and the liquor license was jeopardized A. Yes. through an arrest, did your organization help • out the store owner in any way? Q. And did you wear recording devices during A. NoJor the simple reason that ... if they had any of these meetings? a bar that was doing, say, 300 a week, you know, A. All of them. the bar was dead, and he had the machine that was doing 2,000 a week, that was 2,000 a week • Q. A nd did you testify in grand jury? from the machine. What did he care about the A. Yes. liquor license? He just wanted the machine to keep going. Another Vantage Point Q. Do you have any knowledge about the kind • of contractual agreement which was made be­ A similar tale was told by George Fresolone tween the store owner and Grayhound when the ~bout business practices in the South Jersey-Phila­ machine was put in? delphia area. A. Okay. What happens there is that ... a lot of times you get into a location. a lot of these • Fresolone had been assigned by Nicodemo Scarfo, people are ill trouble and they need money, so Sr. (now incarcerated head of the Bruno/Scarfo what you do is - Carmen would do is that he crime family) to collect tribute from Cannen Ricci would give the store owner X amount ofdollars, and Brian Petaccio, the owners of Grayhound Elec- and they would start offputting Pac Man or, you

24 • • know, regular video games in there, and if they the shopkeeper. weren't earning enough money to pay him back, Carmen would take those machines out and put So as the tentacles go out, they become more and in eight liners I a device similar in appearance to more ensnarled into legitimate businesses, and • a common slot machine] or Joker Poker to this is, frankly, the very thing that our RICO Act operate in the establishment because those was enacted to protect against. This is a method machines have the potential of earning a lot bothfor infiltration as well asfor profit-making. more money. • Q. So if I understand you correctly, what he Coexistence Between Legitimate Businesses and would do is hook the store owner into apayment Organized Crime scheme which the store owner couldn't keep up with unless the store owner put in the gambling Joseph Fay had a long experience in the busi­ machines which had a better cash flow, is that ness. He was asked: • correct? A. Well, it's also correct that what happens Q. In your opinion, is itpossible that, in the kind there is that they would take - if I loaned you of business that you were engaged in, is it $5,000 to get that spot, we're going to take possible to exist without the involvement of whatever profits you make from the machine til organized crime? • the $5,000 is paid back. And if the machine is A. Impossible to exist. doing $20 a week, and I'm only taking $10 off my original 5,000, I'm going to tell you, hold it, Q. Why is that? we can't do it like this, let's put these machines A. Because you can't operate these, anything to in and, you know, so what actually he would do do with gambling, wiseguys are there. Anything • is hope that these other video games wouldn't to do with cash, they're always there and, you earn any money, you know, and he would put the know, they can get, they'll take legitimate people eight liners in. He would hook you-and then and put them up front and threaten them and reel you in. make them do things that they don't want to do. They will definitely be in back 0/ any gambling • Assistant Attorney General Carroll explained that's involved anywhere. that in return for such an association store owners could expect protection by an organized crime fig­ John Januska, who operated in Paterson and in ure, the payment of graft, the elimination of compe­ Essex and Hudson Counties, told Commissioner tition from non-connected vendors, etc. Barry H. Evenchick that he thought there was no • way to cut out "the familyu from the business - And what generally will happen is once the or­ "because it's high stakes." He did not believe that ganized crime network opens up that particular legalization would put even a dent in the illegal channelo/profiting, the vendor who is helping business" ... because we already control the industry achieve that profit-making will expand, often­ already, so who are you going to put it in?" • times the organized crime individuals will give additional stops, put a machine here, put a ma­ chine there .... All the while, the criminals are Can the Business be Purged of Organized Crime expanding their control both over the vendor Innuence? and as well as over the industry, because by con­ • trolling the vendor, you are 50150 partners with Fay was asked to suggest the best way to get

25 • organized crime out of the business. right back, you know, and they're doing the • same thing again. You know, it's not - you Q. Do you think that a crackdown by law en­ know, a regular crackdown isn't going to help it forcement would be effective against the people because the laws ain't- the laws ain't strong who operate these machines? enough, and it's money, it's earning money, the A. No, because we used to put our machines out machines earn a lot of money there. • -they cost us 3,000 to 4,000 [dollars}, it didn't matter. After we got over 2-3 weeks, we made Q. In your opinion is there any way to stop the our money back. Then they could take them if illegal use ofillegal video gambling machines? that want. We still made a profit, okay. We A. Sure, impose a heavy fine on the store owners would just go out and buy new ones. It didn't and the vendors or prison term or both. matler. They don't have the manpower .... They • have to go out every single day and take every machine every sing'le day to hurt the vendors. Payoffs There's just no way - they make too much money. Carroll told the Commission that official cor­ ruption, the most insidious consequence of organ­ • Q. Do you feel legalization might lessen the ized crime involvement, was discovered during the impact of organized crime? course of Project Ocean. A. No way. We have found that in many areas where com­ Q. Still going to exist? pletely legitimate police officers and licensing • A. It's the cocaine, gambling, stealing, what­ officials have close alliances and friendships ever,l've seen things, I know. There's no way .. and normal daily interaction with local busi­ I mean it's right there on the corner, the corner nessman, as most good police departments and store. It's different ifyou want to go to Atlantic licensing bureaus would, and you have these City-you have to get on the bus, this and that. same originally legitimate businesses then get­ • It's a different story,but it's right there. You live ting illegal gambling devices, then the corrup­ right in the neighborhood. It's a tease. tion sometimes begins, because now you have a store owner who may be stepping across that Q. Is there any way for anybody who plays these line. And with him, comes the knowledge and machines in the long run to make any money the acquiescence ofthe police officers and offi­ • from them? cials in the town. And wefind that it' sfenilefor A. Never. this type of corruption.

Q. Anybody who plays in the long run loses, It ranges from what I would term a noncriminal then? type ofavoidance ofthe problem ... /or example, • A. Yes. a local licensing board may require that every amusement device in town have a sticker or a Fresolone responded similarly. He said a crack­ stamp, and all of a sudden, Joker Poker ma­ down on video gaming machines would be ineffec­ chines appear without any stamps and so forth. tive. • Police officers ... have been tempted by the large Because what happens there is that they take the amounts of money that have been offered, to machines, and a week later, the machines are look the other way in the operation ofthese type • 26 • • of machines .... spectors? Was it people in a higher level of the city government? A particularly revealing exchange took place A. We got to some mayors and got to, you know, between John Januska and Commissioner Kenneth the police, Building inspector, I didn't need • D. Merin regarding official corruption. none of them for a machine.

Q. Did you ever attempt to bribe or pay off a A similar exchange took place between Januska public official who rejected the bribe? and Commissioner Evenchick and Chairman Zaz­ • A. No. zali: Q. Is there any area ofthe state, any particular BY COMMISSIONER EVENCHICK city or town, that you felt you should not go into because of that reputation? Q. Sir, let me first ask you by way of a general A. I never experienced it, no. question ifyou would comment on the extent to • which the operation that you have described in­ Q. So basically, youfelt any city or county in volved payoffs to local or municipal officials. your area was fair game . You could get to A. I didn't pay anybody. I controlled the whomever you had to get to in order to achieve Passaic area pretty good, and I was, you know, the protection from the public sector? paying people for other businesses J had in Pas­ • A. Right. saic, and the numbers business, sports business - same thing in Hudson county - so I didn't Q. We're trying tofigure out how we can stop pay any extra, if that's what you're asking. this sort of thing from occurring. Is there anything that you can suggest to us as a way of Q. Well, in these times of cost effectiveness, I • controlling the public officials? Is it just through­ suppose that's favorable testimony. What about out the total system? Is there anything you can with specific regard to the video gambling ma­ do, you can suggest, that we can do to help to chines, are you aware of any illegal payoffs to control this? any municipal officials, whether by you or by A. Only way you can do it is banning the those whom you've identified? • machines that are only used for gambling pur­ A. I don't know any individual that got the poses anyway. money itself, but sure, we discussed that this guy was paying that guy and that guy was paying this Q. You mentioned you'd made payoffs to public guy, yeah, sure. You have to pay the law some­ officials for other. things other than the gam­ what and you pay as little as possible. • bling machines. A. Yes. Q. How extensive was the involvement ofmu­ nicipal officials in these kinds of illegal opera­ Q. Is that pretty easy to do? You had no tions? problems doing that? It was well-known that A. In my illegal operations? • you could bribe people? A. I was in the businlJss 25 years,' I only spent Q. Yes, sir. four years in jail. A. Well, let's put iuhis way. You tee, between Passaic County and Hudson County, that's a Q. Whatkindofpeoplewouldyougoafter? Are little bit ofHoboken, Jersey City, I did 290,000 • you talking about building inspectors, safety in- {dollars] in the numbers business. I kept three

27 • per cent on the side for the politicians and the son? • cops. And J also had a piece of the numbers A. Yes. business in Jersey City ... which consists of two million. So they had considerable payoffs. Q. Did you make payments to police officers? A. Yes. • BY CHAIRMAN ZAZZALI: Q. What was the purpose of the payments to police officers? Q. And just to follow-up, you're saying that A. J would make payments to the police officers these payoffs would cover both the video poker in Paterson because they would only give you a machines and your other businesses, you were license for three machines. They would take a getting basically two for the price of one? payoff each week and J had maybe 10 machines A. Well, in my instance, yes. in one place, or eight machines in another place and they would tell me if anything was going to Januska could not remember the exact number come down beforehand so I could pull my ma­ of public officials he had bribed, only that it had chines out and be legal. • been "quite a few." Q. So if any authorities were going to come in Fay testified about his experiences with public and try and enforce the three machine limit, officials in the areas where he conducted his busi­ you'd know about it? ness. A. Yes. •

Q. During the time that you were putting ma­ chines in Newark, did you ever have to make Kinds of Locations payments to any public officials in connection with your business? Even though no witness could be precise about • A. Yes. the number of video gaming devices and their loca­ tions in New Jersey, they conflrmed that video Q. What kind ofpayments did you make? gaming devices are located in many different types A. Howmuch? of locations. Fay, as a distributor of video gaming devices, was particularly well qualified to describe • Q. Yes. the types of outlets for the machines. A . Usually it was about 1,000 a month here and there. I don't remember, that was in the begin­ Q. You spoke earlier about having 60 or so ning. Joker Poker machines out on the street. What kinds of locations were they in by that time? • Q. Were those payments for pennits or were A. Candy stores, bars, gas stations, funeral they to allow you to operate legal machines or parlors, car washes. illegal machines? Do you understand my ques­ tion? Q. You had Joker Poker machines in funeral A. It WQ$ a payoff. If you didn't pay, you parlors? • wouldn't operate. A. One funeral parlor.

Q. While you were in business in Paterson, did Q. Do you recall how many machines you had you make payments to public officials in Pater- in thatfuneral parlor? • 28 • • A. Five or six, seven, it depends. A. Well,just about all of them went 24 hours. Like-l had afire house,people' s homes, some Q. Do you know where in the funeral parlor candy stores-stayed [open] 24 hours. exactly these machines were located? • A. In, like, a lounge area where you would, Q. You had afire house, do you know ifit was whatever, have coffee or, you know. a municipal or a volunteer? A. No, I didn't care. Q. Was it accessible to anybody who could walk in off the street? Q. What town? • A. If you had a quarter, you could play it. A. Belleville.

Q. How did it come about that you were able to Q. You also had machines in people's homes? locate Joker Poker machines in a funeral par­ A. Yes. lor? • A. I had [machines in] a candy store in Newark Q. Do you know about how many machines did and a lot of customers, and one customer was you put into people's homes? this woman around the block tOOt-1 think she A. Usually two or three, depending on how owned the funeral parlor, worked there, what­ mw:;h action was there, how much money you ever-and the store would close at 1:00 in the could make, how many people were waiting to • morning, play.

Q. The candy store? Q. How many of these places did you have? A. The candy store - and they were still How many individual private homes, do you playing. They wer.e ready for action now, you recall? • know. The guy had to go to sleep sometime, the A. Not too many, maybe eight or nine. guy that was running it, so after awhile they came up with the bright idea that they would put Q. Did you make the same kind ofsplit with the it into thefuneral parlor and this way they could private homeowner as you did with any other lo­ run it 24 hours a day and they didn't have 10 cation -50/50 split? • leave. A. Yes, actually,I did give them 50/50 but what would usually happen was the guy that had it in Q. It didn't matter ifthe candy store had closed his house was addicted to the game so they down then? usually ended up with nothing anyway. • A. Right. Q. So they kept the funeral parlor open for 24 Why People Play hours to play these Joker Poker games? A. Yes. Fay described the attraction of video gaming devices. • Q. Did you have other locations besides that funeral parlor where you were running the Joker Q. You say that these things would play a Poker machines/or 24 hours a day? quarter. For a quarter that you could play on A. Yes. the loker Poker machine, what kind 0/ a payout was possible/or the best winner? • Q. Where were they? A. Joker Poker machine, you could win/or the

29 • • best hand, $3,000 for a quarter. A. Yeah, entices him to play more, and he tells his neighbor. Q. Later, when you were able to put the bill acceptors on, I would assume that the payoffin~ Q. And you'd get pretty good business in the creased also. In other words, somebody could beginning, is that it? • win more than $3,000? A, ... /YJou always got pretty good business all A. Yes. th way through, but ifit slacked-what we did is eventually bring it down so there would be more Q. How much money could somebody win-at profitfor us, and then when you see the business the peak? started to slack off, you'd bring it back up to get • A. Maximum, $40,000. the business back in.

Q. Did you ever have a machine that paid out George Fresolone testified that Grayhound had $40,000 to a winner? eliminated the coin mechanism from some of its A. Yes. devices "for the simple reason, who wants to deal • with change?" He had been told by Carmen Ricci John lanuska testified about methods employed that Grayhound was going to start using a new bill to entice and keep players. His was a marketing acceptor which would recognize $50 and $100 bills. approach designed to target a neighborhood in which "So yo\,} can put a lot of money in it and it doesn't devices were located. Hisjob was tricky. Since he give you any change. Once you put the money in, it • obviously could not advertise, he had to rely on stays in." word-of-mouth. According to Fresolone, Carmen Ricci was as Well, you could set the machine whatever you astute about marketing as Januska. Fresolone re­ want,youknow. What you did is, ifit was a new lated an episode in which Ricci advised a customer • stop, y,(lU' d put the payout high, say you'd put it of Fresolone not to get too greedy. at 80 percent, and then as it progressed, the neighborMlJd would know, you know, you can He told me-we had a problem one time that the make pretty good money on the machine. Then guy that I was selling the machines to in New you'd go baCK ir and reset th(' machine down. York, Richie Martino, wanted to increase his • Next time, you mig ht bring it down to 60 perce nt. earning power on the machines, he wanted to Next time, you brin.g it down to 40 percent. change the percentages, and Carmen told him -Carmen told me that, you know, at the time, they were paying out 55 or 56 percent, and that was good business, that money went backfor the • Q. And did I understand you to say that you simple reason thatpeople came backandplayed. couldfix the machines to pay out whatever you wanted to, to yourselves and to the players ofthe Fay related a video gaming vignette which should machine? cause anyone to pause. A. Yes. There's a chip on the board there, you • just chang~ the odds. One day I was in one ofmy locations collecting money and a guy walks. in to buy a pack of Q. And in the beginning, the payout to the player cigarettes and he noticed that the machines were Wa.:i high so as to induce him to continue play­ mobbed with people. He asked me what it was. ing? I said it's a keno machine and you put a quaner •

30 • • in itandyoumightwina dollar or two. So heput Genovese family. The Sugerman operation was a couple of quarters in and the first day I think such an important source of revenue to the Gen­ he won about $100 .... {T]hen he was back every ovese family that, according to information picked • single day after work and after about two or up in 1983 by federal electronic surveillance, the three weeks he was there every day, nine in the family boss, two capos and an associa~ often made morning. Suddenly his Jaguar disappeared and decisions involving th~ flrm's daily operations. he lost his job. His wife came looking for him and it was a mess. His wife would come down Januska also testified that Sodano took "under every day trying to get him out ofthere because, his wing" young Salvatore Mirando, whose late • you know, he was blowing all his money. And father Joseph was a Bruno associate subordinate to what happened, she started playing the ma­ Sodano. Januska said Sodano got Mirando a job chine. And then they just disappeared off the with Sugerman so he could learn the vending and face of the earth. I guess they didn't have any video gaming machine business and eventually set money left, I didn't see them anymore. up his own business under Sodano. Januska said • that after Sugerman was taken away from Sodano, Mirando left Sugennan and, with money provided Organized Crime Families Vie For Control of a by Sodano, set up his own business. Januska testi­ Lucrative Industry fied that Mirando, who lives in Holmdel, is "a giant in the business today," worth more than $20 million. • The issue of organized crime control of video gaming manufacturing companies is complicated For his part, Mirando denied virtually every- by relationships between blood relatives as well as , thing Januska said about him. Testifying several between organized crime families. Disputes over months after the public hearing, Mirando said he control were usually settled by high-level organized worked for Sugerman from 1979 to 1982 before • crime "sitdowns" in New York, New Jersey, Florida setting up his own business, SMS Manufacturing of and elsewhere. The case of Myron Sugerman is Lakewood, with Vincent and Pasquale Storino, in enlightening. 1982. He said the three each put up $10,000 of their own money to begin SMS. He said he bought the Sugerman's late father Barnet was a long-time Storinos' interest in the fllTIl in January, 1990. • partner of Genovese capo Gerardo Catena in Run­ Mirando said Sodano put up none of the money used yon Sales, a vending machine flnn in Springfield. to start .the business and got no proceeds from it. He Meanwhile, Joseph Sodano, a Bruno famiiy mem~ characterized Sodano as "a casual acquaintance and 1 ber, had become a silent partner in the mid-1970s friend ' who was also a friend of his father. with Myron Sugerman in U.S. Amusements, Inc. of • Hillside. According to Januska, however, in the The Storinos are nephews of the late Vincent early 1980s, when it became known in mob circles James Craparotta, a Lakewood car dealer who was that Sodano and the Bruno family were making a Lucchese organized crime family associate. huge proflts from the relationship, Louis "Streaky" According to an April 18, 1991, news release from Gatto of Fairlawn, a Genovese capo, staked a claim the Attorney General's offlce, Craparotta was tak­ • to Sugerman on behalf of the Genovese family, ing payments from "two of the owners of SMS," based on the prior partnership between Catena and presumably his nephews. Craparotta was beaten to Sugennan's father. As a result of this claim, a death with golf clubs on June 12, 1984, because he meeting was held in New York with leaders of the would not share that tribute with his superiors in the Genovese and Bruno families during which it was Lucchese family, according to the Attorney Oen • decided that Sugerman did indeed "belong" to the '. 31 eral's office. The Attorney General's office also the tribute he was receiving from the profits of SMS • said that Sodano was receiving tribute from SMS Manufacturing. The indictments also included alle­ "from a third owner" of the finn. gations that various of the defendants were trying to muscle in on other vending machine ventures of Within a month of Craparotta's murder, accord­ Salvatore Mirando in the Point Pleas,ant area. Key ing to the Attorney General's office, a dispute arose witnesses before the State Grand Jury included • between the Lucchese and the Bruno/Scarfo fami~ George Fresolone and John Januska. lies as to which controlled SMS. Other "sitdowns" occurred, some in Florida, during which it was On March 7, 1991, Cannen Ricci, Brian Petac­ decided that the Lucchese group would get a two­ cio, Alan Cifelli and Grayhound Electronics were • thirds share of the profits, and the Bruno/Scarfo indicted by a St~te Grand Jury on racketeering group only one-third. charges involving the sale of video gambling ma­ chines. George Fresolone was a key witness before the grand jury in that case also. More Prosecutions Myron Sugennan pleaded gUilty on March 24, • On April 18, 1991, Attorney General Robert J. 1987, to federal charges involving the illegal trans­ DeITufo announced the indictment of 53 alleged portation of gambling devices to Washington, D.C. members or associates of two separate organized The cbarges grew out of a federal investigation of crime families operating in New Jersey, New York the video gaming industry called Operation Vidgam. or Pennsylvania. Some of the charges center on He was also a defendant in Operation Ocean in • control of the illegal video gaming industry. The Essex County. charges included the allegation that Craparotta was . murdered in 1984 because he would not share any of •

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• 32 • • IV • THE VICTIMS

The plight of compulsive gamblers and their identity the Commission is protecting, was inter­ • families is a subject of great concern to the Commis­ viewed by SCI counsel. sion. There is abundant evidence that the problem is a serious one. The Federal Gambling Commis­ The man claimed to have lost at least $50,000 at sion concluded in 1976 that when widely available, video gaming machines in Paterson. He obtained legal commercial gambling leads to significant the money by extortion from a person who had • increases in compulsive gambling. "This is consis­ shown him kindness, given him ajob and a place to tent with the hypothesis that widespread availability sleep. He told counsel that he did not have a of gamblmg in a legal form leaves a portion of those gambling problem until he was introduced to video classified as potential compulsive gamblers to actu­ devices, which he found to be almost hypnotic in alize their potential compulsion," the federal com­ their action. He obtained credit from operators to mission report stated. play the machines and also played with money designated for marital support, even though he had Arnold Wexler, Executive Director of the Coun­ . previously been on good terms with his ex-wife. cil on Compulsive Gambling of New Jersey, :~'lC., Eventually, he lost his business, his home, his car has testified frequently before legislative emllmit­ and his family. • tees on the problem of compulsive gambling in New J(;rsey. He was questioned at the SCI public hearing Hoping to recoup his losses quickly, the man by Deputy Director Clark. had embarked upon a new career operating video gaming devices in a "coffee shop" in Paterson. The :. Q. Would you say {video gambling is] any more devices were ordered and delivered but before they addictive than any other forms 0/ gambling? could be plugged in, he was arrested and charged A. From the stories I've heard from South with extortion. The man suffers from numerous Dakota, from Maryland, from Delaware, from serious maladies~ which he believes were caused or the Midwest andfrom the south, where they have aggravated by his standing for uncounted hours at these {video] machines - in fact, J just heard video machines. • stories from California recently - people that are experts in this field tell me that it's probably SCI Counsel Clark asked Wexler if he would be the most addictive form of gambling there is opposed to legalization of video gambling. today. We are not a prohibition group . ... But J could • Q. Do you know why they say that? tell you that the State o!NewJersey today is ad­ A. Probably because o/the quick,fast action. dicted to gambling. We're in a position where we have 26 bills right now - the last time I Illustrative of this point is a telephone call re­ counted the bills - dealing with the new forms ceived by Mr. Wexler shonly after his appearance at or added forms of gambling . ... • the public hearing from a man who believes that video gam bling has ruined his life. This man, whose J don't kn... w where the State of New Jersey is

33

------going to stop with this legalization ofgambling, compulsive gamblers start gambling before age • but we've created a major epidemic in New 14. Jersey with compulsive gambling ....

Q. Do you have any estimate as to how many compulsive gamblers there are in New Jersey to­ The Commission is aware that many experts on • day? mental health problems of juvenile,S believe that A. We believe that there are 400,000 compul­ gambling among minors is growing in frequency sive gamblers in New Jersey, roughly. [We] and seriousness. Law enforcement and criminal also believe that 350,000 spouses are living with justice literature report a growing belief that video an active [compulsive] gambler in their home game playing among young people, coupled with • and 700,000 children living in a house with an gambling, correlates with increased crime. A 1987 active I compulsive] gambler, and that's the real British study concluded that "criminal" video game part that bothers me. players were distinguished from their non-criminal counterparts by starting younger, playing more fre­ The Commission is also concerned about the quently, spending more money and having more • effect of these devices on minors, although the lack problems with personal relationships. of information is frustrating. This is a problem deserving special attention. Mr. Wexler acknowledged that there are few precise statistics regarding the problem of illegal Mr. Wexler testified: use by minors of video gaming devices. However, • Business Week magazine, in an article published in You know, I have three articles that talk about April, 1991, reported: video games. Here's onefrom The [Star] Ledger, May 6, 1982, lInt of Florida. It talks about an Especially troubling is the surge of ganlbling by 11-year-old boy who's sitting injai/ because he teenagers. According to a 1987 study of New • was hooked on video games. Here's anothe r one Jersey high school students by Henry R. Lesieur from the News Tribune in ... 1982, talks about of St. John's University, 86 per cent had gambled l(video games called cause for truancy." Two at least once a week. Atlantic City casinos, women said their children had been skipping where gamblers must be at least 21, turned away school to play video games. Here's one out of 200,000 minors in 1987 and escorted an addiM • California about a boy pUlledfrom a chimney, tiona135,OOO from their floors. But often no ont.~ and he and his friend were charged with home is around to keep minors away from automated burglaries out of Los Angeles, two nine-year­ gambling machines, such as player~activated old boys, and it talks that they ripped offhome­ lottery terminals. owners for $3,800 worth of jewelry and $500 • worth of cash to play video games. So we have New gambling technologies are driving much of some documentation of it. that growth. 'They have propelled the booming lottery business and revitalized the sluggish You know, you talked before aboUJ youth. Ninety­ casino and horse racing industries by making • six percent, we know from Dr. Custer who re~ betting easier, quicker, more exciting and more cently died, who was the foremost authority on seductive. New video versions of slot machines compulsive gambling in New Jersey, Dr. Custer and card games, say casino executives, are cap­ did surveys and showed that 96 percent ofall tivating younger players raised in the video age. • 34 • • Even as this report was in its final stages of preparation, a two-year study by researchers at the University of Medicine and Dentistry of New Jersey concluded that the lottery is the most common outlet • for compulsive gamblers. If this is true, proposals to authorize a state-run video lottery deserve special scrutiny. •

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• 3S • v

SOLUTIONS? •

As was stated in the Introduction to this report, enforcement understandably gives a higher priority the many issues raised by video gambling, while to investigating other offenses. Nevertheless, the • perhaps superficially simple, are in fact exceedingly Commission believes the Attorney General should complex. The problems are not easily soluble and ask the Legislature to adopt whatever amendments the Commission believes the Legislature and the are necessary to remove any uncertainties about the Governor are the appropriate entities to decide the applicability of the gambling, forfeiture and racket­ issues. Nevertheless, the Commission believes that eering statutes to offenses involving illegal video • its investigation and public hearing have already gaming machines. In this connection, consideration contributed significantly to that dialogue. The dis­ should be given to improving local licensing proce­ cussion in this report of the issues adds to that dures, including the numbering and tracking of contribution. indiviilual machines.

One of the most difficult of these issues is that of Since the prime impetus for the growth of video • enforcement of the criminal laws against illegal gambling is the huge economic gain which can be possession or use of video gambling devices, which derived, the greatest deterrent to it may be found in is interwined with the issue of legalization. Stated raising the economic stakes for getting caught. another way, if the machines cannot be policed Certainly manufacturers and distributors of ma­ • effectively, is legalization the only alternative? Or chines, as well as members of organized crime, should nothing be done at all? should be targeted. But shopowners and other entrepreneurs looking to make a quick, easy buck Clearly, the status quo is unsatisfactory. Thou­ should not be ignored. The grocery store owner sands of machines are already in use, especially in must know that he stands to lose his property. The urban areas where those least able to afford to play tavern owner must realize that he is putting his • them are losing money. Aside from purely humani­ liquor license at risk by permitting illegal video tarian concerns about these players as well as from gambling. Both may think a little harder about it the fact that all players are being cheated in playing than if all they have to fear is a small fine and loss of a low percentage game, much of the income is going me offending machines. And the threat of the • to organized crime. Low priority policing and a forfeiture of their major assets may induce small lack of regulation are, in effect, subsidizing a major businessmen to cooperate with law enforcement in segment of the underworld. proceeding against distributors and manufacturers of the machines.

Increased Law Enforcement • Banning Video Games Because of technological considerations, illegal machines are difficult for police to detect. And The enactment oflaws to impose a complete ban because penalties for violations of the gambling on any electronic device which can be easily con~ statutes, even when they apply, are minimal, law verted to illegal use would eliminate the present law •

36 • • enforcement dilemma of distinguishing the "good" Although it is unlikely that the State would enact machines from the "bad." Any such machine would a universal system of regulation for all such games, be subject to seizure on sight as per se contraband, the Commission believes that the State should at • without the need for police to undertake lengthy least endeavor to apply the available security tech­ surveillance to witness its being used for illegal nology to the arcade games conducted with its purposes. approval along the boardwalk at shore resorts and at amusement parks. To accomplish thi~, DGE should, This simplest-to-impose and easiest-to-carry out consistent with a consolidation plan submitted to the • solution has one obvious major drawback. It would Governor by the Attorney General, assume the outlaw not only unlawfully used machines, it would responsibilities of the Amusement Games Control also ban those which are used innocently, including Commissioner in the Division of Alcoholic Bever­ those played for inexpensive prizes along the board­ age Control. walks and at amusement parks, as well as those • which exist - ostensibly for pure entertainment­ throughout the state. Legalization of Video Gambling

Legalizing video gambling would require not Government Inspection and Regulation only a referendum but also an inspection and regu­ • lation scheme like that discussed in the previous The technology already exists to inspect video section, as well as a mechanism to screen and license devices to ensure that they will play legally penn it­ operators. It is almost impossible to estimate either ted games only and to detennine easily if they have, how much such a regulatory system would cost or been tampered with. According to the testimony, how much play and revenue would be generated. • there is no technological reason why the Division of Gaming Enforcement laboratory could not apply More than any other response to illegal video this knowledge, now used to guarantee the integrity gambling discussed in this report, legalization pres­ of slot machines in Ad an tic City's casinos, to ensure ents a serious threshold policy question: Should that video amusement machines are not used for New Jersey introduce yet another fonn of legal • illegal gambling. There are, however, two sizable gambling, especially in light of the often expressed practical pitfalls in this idea. criticism of the extent to which New Jersey already relies on gambling revenues and the fact that any First, although no one can give even a rough new fonn of gambling will inevitably create new estimate of the num ber of video games -legal and gamblers, including some compulsive gamblers. At • iUegal- in New Jersey, the number may be more least one commentator, New York Times columnist than the DGE laboratory could possibly handle, William Safrre, in the column cited earlier, wrote, even with a significant increase in staff. "It is wrong for the state to exploit the weakness of its citizens." Second, the cost of inspecting and securing all • the video machines in New Jersey would be sub­ stantial. That cost should not be borne by the State, Video Lottery and it is unlikely that many owners of video games would be willing to foot the bill, as the casinos do, In 1982, then-Attorney General Irwin I. Kim­ to have their machines tested, especially when the melman ruled that although games played on a • result would be to render the machines unfit for their player-operated video tenninal satisfied the legal most lucrative use. definitions of a slot machine, "there is no constitu- • 37 • tional or statutory bar to the incorporation of a current Attorney General to review the issues ad­ consumer operated video game's terminal into ... dressed in the 1982 opinion, the reasoning of which the New Jersey State Lottery." However, lottery 'Can be questioned, for it makes no sense to authorize games using video gaming devices were never a video lottery including inter-actiye games if the implemented because on March I, 1983, then- Gov­ Attorney General doubts that such a program could • ernor Thomas H. Kean signed a law prohibiting survive an almost certain legal challenge. their use by the lottery, overturning the impact of that legal opinion. And lastly, the recent report by the University of Medicine and Dentistry of New Jersey on the rela­ The Legislature is now considering bills which tionship between the lottery and compUlsive gam­ • would authorize the Lottery Commission to install bling deserves careful scrutiny as the pending bills video lottery terminals in taverns ana restaurants are considered. serving liquor. But a fundamental legal question regarding this proposal remains unanswered and * * * must be resolved, assuming one of the pending bills • is enacted. That question is whether the program One final note - in grappling to find a solution would be limited to mere video versions of the to this problem the policymakers should not expect familiar lottery games or could be extended to so­ that any fonn oflegalized video gambling or lottery called "inter-active" video games in which the player will 'put the illegal games out of business. Thus, makes certain choices or decisions in response to his there will always be a need for some level of law • initial draw of "cards" or numbers. Obviously, the enforcement response. And should there be any latter type of game which, according to the 1982 legalization of new games, there will also be a need Attorney General's opinion, is permissible without to provide additional resources, either from public referendum under present lottery authorization, has funds or contributions by legalized gambling entre­ a much greater potential for raising new revenue, preneurs, to programs that refer and treat compul­ • and along the way creating an untoldnumberofnew sive gamblers. gamblers. An inter-active video lottery would also present at least a perceived threat to the Atlantic City This report has endeavored to summarize com­ casinos' slot machine trade. plex and difficult issues. We trust that the facts presented and the solutions discussed will enable the • This proposal requires careful review of its policy makers to act wisely for the benefit of the policy implications by the Governor and the Legis­ people of New Jersey. lature. Furthermore, it suggests a need for the •

The investigation that led to this report was directed by SCI Counsel James F. Villere and was conducted • by Special Agents Michael R. Hoey and Paul P. Andrews Jr., Intelligence Analyst DebraA. Sowney andformer Special Agent James J. Sweeney. Assis­ tance was also provided by attorneys and investiga- tors from the State Organized Crime Task Force in • the Attorney General's Office and detectives from the State Police. 38 •